“The more you grow, the more you lose and you have to turn that corner at some point,” CEO Tom Blomfield told Reuters, referring to the moment when each customer is no longer a loss to the bank. However he has no target for overall profitability at Monzo.

Monzo and competitors like Starling Bank still largely steer clear of the loans and hefty fees for overdrafts or foreign exchange that have been so lucrative for existing banks, but which the newcomers see as ripping off consumers.

Absorbing such costs has been expensive for some of the upstarts, but they think they can make money from a new model based on using customers’ data to push them towards other financial services, taking a commission whenever it works.

If successful, they could eat into the retail banking profits of the big banks just as new rules are being introduced to reduce their dominance, and returns are being shredded by tougher regulation and growing competition.

They see the big banks’ approach, built around lending out customers’ deposits at higher rates of interest, as costly. Capital requirements are high, which would affect the way investors looked at the newcomers if they took that route.

“Your business tends to get valued like a bank and not like Google,” said Blomfield.

THE ‘MARKETPLACE’

The digital-only banks boast slick apps, which can analyze spending in real time, send budgeting nudges and allow users to freeze and unfreeze their card at the click of a button.